Steinberg: NBA is back, but several mistakes were made

Leigh Steinberg

The NBA and its players finally reached accord on a new collective bargaining agreement last week. The season is scheduled to begin on Christmas Day.

The cost has been massive to owners, players and employees at the venues. Lost television revenue is enormous. Little of the lost revenue can be replaced. The deal was aimed at teams like Miami and the Lakers – it will be impossible to keep a roster filled with highly paid stars because of the luxury tax.

This is an example of a failed negotiating process. How did rational businessmen and players with short playing careers allow the process to go so wrong?

When strong-willed men, convinced that their position is imminently reasonable, begin to feel that the other party is in bad faith, and compromise that will lead to disaster. Unintended consequences occur.

I wrote "Winning With Integrity" to suggest how deadlocks can be avoided in negotiations and produce a win/win result. Deadlock between parties can lead to divorce, war or the loss of an NBA season.

The longer an impasse continues, the more entrenched and intransigent people can become. Having let the process drag too long, parties are more inclined to see an apocalyptic future and are locked into the absolute necessity to maintain their future.

How did the negotiations for a new CBA get so destructive between the NBA Players Assn. and NBA management?

1. They lost perspective that they are in the entertainment business in an ailing economy. The real battle for the NBA should not be labor versus management, rather the competition with the NFL, NHL, HBO, Disneyland and every other form of discretionary entertainment spending. The priority is building the brand of the NBA and stimulating revenue flow from attendance, television, sponsorship and merchandising and other creative ancillary revenue opportunities. The cardinal rule for any professional sport is: don't alienate the fans. As P.T. Barnum proudly proclaimed "The Show Must Go On." The specter of millionaires bickering with billionaires leads most fans to say "a pox on both their houses."

2. They committed a form of sports suicide. Fans had high school, collegiate and professional football and the NHL and college basketball to keep them occupied. Cancelling of games means irreplaceable revenue is lost. The players lost an estimated $82 million with each two weeks of missed games. Owners lost revenue. The impact spreads to dozens of other employees and businesses that depend on the playing and broadcast of games. It will take 30 days to have a reasonable training camp and exhibition games as the league ramps up to launch on Christmas Day, which just so happens to be the most profitable day of the regular season.

3. The parties delayed talking substantively until way too close to training camp. In the NFL negotiations, the players decertified and went to court in March and April and they cut it close. But they knew that in the NFL, no one gets serious about business until a deadline exists, and they responded to the deadline. In NBA and NFL rookie negotiations I would tell owners: "Let's pick a date several weeks prior to the opening of training camp and work against that deadline. Let's pretend that the negotiations have gotten acrimonious, the coach and owner are ready to say 'this player will be of no use this year if he doesn't sign,' fans are angry, media coverage is harmful, and the player is ready to say 'I never want to play for this team, I'll wait until the next draft,' what would be your position then?" They needed to narrow the gaps and anticipate a worst-case scenario much earlier. And, they should have been in non-stop mediation in the summer.

4. The parties started publicly arguing that only their position was right. David Stern is much more antagonistic and anxious to paint the union leadership as betraying the best interests of their players than he needs to be. I listened to an interview he did last week that was a declaration of war, painting the union into a corner. The NFL Commissioner Roger Goodell knew that his constituency was owners, but said little publicly and never personalized the process. Individual players have spoken out, to which the public has praised some and admonished others.

5. A significant group of owners firmly believe that they would lose money if the season is played and without substantial changes in rules and profit splits, they would be better off not having a season at all. That group thinks that the last management offer was excessive and was relieved to see the players didn't take it. Keep in mind that the deal will make it extremely difficult for a team like the Lakers to keep its top stars together. The new luxury tax will see sweeping changes after the initial two-year grace period. For the first $5 million over the salary cap, owners like Jerry Buss will be forced to pay $1.50 for each dollar above the cap, and that penalty rises to $3.75 for every dollar above a 20-million-dollar overage. This system would have cost the Lakers almost $60 million in penalty payments last year in addition to payroll and other costs. It looks like it's time to say goodbye to Laker dominance – large numbers of highly paid veteran superstars simply won't be able to stay together.

This should have been a time where the parties locked themselves into a room and kept patiently negotiating until they reached a compromise. Binding arbitration could have been tried. Major League Baseball committed a form of brand suicide with its 1994 strike. The following season attendance dropped by $40%. Merchandise sat on shelves, unwanted.

It took the steroid-enhanced home-run totals – highlighted by the Sammy Sosa-Mark McGwire race to bring that sport back.

The NHL never seemed to fully recover from its disastrous strike/lockout and still doesn't have a major network television contract.

So when pundits proclaimed that a situation can't get any worse, believe me, it can.

Consequences occurred here that will be highly destructive for the NBA. Hopefully future sports CBA negotiations can put their sport first and keep negotiations private and constructive.